The Central Bank of Kenya (CBK) has moved to inject fresh momentum into the economy by lowering the Central Bank Rate (CBR) by 25 basis points to 9.50 per cent from 9.75 per cent.

The decision, reached during the Monetary Policy Committee (MPC) meeting chaired by Governor Kamau Thugge at the bank’s headquarters on Haile Selassie Avenue, is aimed at encouraging commercial banks to lend more to the private sector and drive economic growth.

The MPC noted that the global growth outlook for 2025 has been revised upwards to 3.0 per cent from 2.8 per cent, supported by stronger-than-expected economic performance in the United States and China, largely due to reduced trade tariffs and improved global financial conditions. However, the committee warned that significant risks remain.

“The global growth outlook for 2025 has been revised upwards to 3.0 percent from 2.8 percent, mainly reflecting upward revisions to growth in the United States and China due to lower effective tariff rates on trade and improved global financial conditions,” read part of the statement dated August 12, 2025.

Uncertainties over trade policies and tariffs in the U.S., subdued global demand, and heightened geopolitical tensions in the Middle East and the Russia-Ukraine conflict could still weigh on growth.

Global inflation is projected to ease in 2025 on the back of lower energy prices and reduced demand. Nonetheless, volatility in oil prices and elevated costs of certain food commodities, especially edible oils, could present challenges for price stability worldwide.

Domestic economy shows resilience

Kenya’s economy has continued to demonstrate resilience, with first-quarter GDP growing by 4.9 per cent in 2025, driven by robust agricultural performance and a rebound in construction. Growth is projected to strengthen to 5.2 per cent in 2025 and 5.4 per cent in 2026, supported by key sectors including agriculture, manufacturing, and services.

Inflation stood at 4.1 per percent in July 2025, comfortably within the government’s target range of 5±2.5 per cent. Core inflation was 3.1 per percent, while non-core inflation rose to 7.2 per cent, largely due to higher energy prices. The MPC expects overall inflation to remain below the midpoint target in the near term, supported by stable food and energy prices and a steady exchange rate.

“Kenya’s overall inflation stood at 4.1 percent in July 2025 compared to 3.8 percent in June and remained below the midpoint of the target range of 5±2.5 percent. Core inflation increased to 3.1 per percent in July from 3.0 per cent in June, mainly on account of higher prices of processed food items, particularly of sugar and maize flour,” read the statement.

Lending growth gains traction

Private sector credit growth rose to 3.3 percent in July from 2.2 percent in June, with average commercial lending rates easing to 15.2 percent from 17.2 percent in November 2024. Sectors such as manufacturing, trade, and construction have shown increased borrowing activity.

The current account deficit narrowed to 1.6 per cent of GDP, driven by a 7.7 per percent rise in goods exports, a 12.1 per cent jump in diaspora remittances, and strong earnings from services. Foreign exchange reserves stand at Ksh 1.4trillion, offering 4.8 months of import cover.

Thugge said the CBK will closely monitor the effects of the rate cut and stands ready to act again if necessary. The next MPC meeting is scheduled for October 2025.